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Challenges in our capital markets aren’t unique
September 19, 2019

There’s some comfort knowing others face the same challenges as you. This week’s speech by Jay Clayton, Chairman of the U.S. Securities and Exchange Commission, highlighted that the U.S. faces many of the same challenges described in the recent report ‘Growing New Zealand’s Capital Markets 2029’.

All over the world, economies are struggling with the problem of how to encourage more investment into their mid-sized businesses and projects that create jobs and better community outcomes.

Many also believe we need to encourage more businesses to access public markets to raise money. The idea is this encourages greater participation from ordinary citizens in the business of wealth creation, either through direct investment or through funds such as their KiwiSaver. In the NZ 2029 report this was expressed in the goal of seeing “New Zealand companies accessing public markets to fund growth and to transfer ownership of assets with greater direct and indirect participation by New Zealanders.”

Clayton noted that twenty-five years ago, the public markets dominated the private markets in virtually every measure. Today, in many measures, the private markets outpace the public markets, including in aggregate size.

The problem as he sees it, is that “Main Street” investors, people like you and me, have extremely limited and costly access to our private markets. This tends to increase inequality, as only the wealthy have access to these potential wealth-creating opportunities.

According to Clayton, we should: “(i) increase the attractiveness of our public capital markets as places for companies to raise capital, and (ii) increase the type and quality of opportunities for our Main Street investors in our private markets."

These are themes that also came out of the NZ 2029 report. Use of modern technology platforms can increase access to our markets, but this needs to be coupled with an innovative and responsive regulatory environment that appropriately balances investor protection with access to capital.

This is the purpose of our launch of Catalist. We believe investors deserve better access to investments in mid-sized businesses and social impact projects. And those businesses deserve access to a wider range of investors.

As Clayton says, fundamental economics tells us the power of choice and competition in a market can reduce opacity of pricing and the ability of consumers to “shop” around will “improve consumer outcomes”.

We’re now talking to businesses that may want to join our market, to raise capital and/or to give liquidity to their investors. If these are challenges your business is facing, get in touch today for a chat about how we could help. Or if you’re interested in investing in these types of businesses, make sure you sign up for our newsletter updates.